What are jumbo loans?
Jumbo loans, also called jumbo mortgages, are a type of home financing for loan amounts that are higher than the limits that the Federal Housing Finance Agency (FHFA) allows Fannie Mae or Freddie Mac to purchase or guarantee for the state or county the home was purchased in. Essentially, jumbo loans are used to finance properties that are too expensive for conforming loans.
Jumbo loan quick view
- Loan amounts exceeding conforming limits
- 15% minimum down payment
- Lower debt-to-income (DTI) ratio than conforming loans
- Good credit required
- Available for vacation homes to qualified borrowers
- Simple & secure online application
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When would I need a jumbo loan?
A jumbo loan is needed for a mortgage that exceeds the conforming loan limit set by the FHFA. For most of the United States, the loan limits for one-unit properties in 2021 is $548,250. For areas where the local median home value exceeds the loan limit (Alaska, Hawaii, Guam, and the U.S. Virgin Islands), the maximum loan limit may be up to $822,375. If you need to borrow more than that for a home purchase, a jumbo loan is one way to do it.
Are the qualifications the same for a jumbo loan?
Since jumbo loans won’t be guaranteed by Fannie Mae or Freddie Mac, they’re generally considered riskier. Lenders will probably have stricter qualifying requirements for them. Each lender can decide what their requirements are but be prepared to need a better credit score (likely into the 700’s), lower debt-to-income ratio, and a higher down payment (usually at least 15%) to qualify.
How do jumbo loans compare to conforming loans?
The main difference is the amount of the loan. Both are available in either variable or set interest rates. Jumbo loans may have slightly higher interest rates, but depending on your lender, they may be very competitive to rates offered on conforming loans. And since the loans are larger and there may be extra qualifications to get a jumbo loan, there may be additional fees when the loan closes.
Who should take out a jumbo loan?
Jumbo loans are best used by individuals with high income, a great credit score, a good down payment who are looking to purchase an expensive primary, vacation, or investment home.
Alternatives to a jumbo loan
It may be simpler to take out a smaller conforming loan plus a second loan to secure your property. You’ll want to talk to your mortgage lender to see which option is better for your financial goals.
If you’re interested in purchasing or refinancing a home in Spokane or accross Washington, Chimney Rock Mortgage can help you make it happen. Please contact us today or apply online in less than 10 minutes using the secure online application below.